Bitcoin Price Drop: NYDIG Blames Capital Flight After October Peak

NYDIG: Market Shifts Impacting Bitcoin Price

A report from NYDIG indicates that the same factors that propelled Bitcoin to its peak in October are now driving its price to multi-month lows. The report attributes this decline to reversals in crypto treasuries and capital outflows from investment funds, suggesting "actual capital flight" rather than just negative sentiment.

Greg Cipolaro, Head of Research at NYDIG, stated in a note on Friday that exchange-traded fund (ETF) inflows and digital asset treasury (DAT) demand were key factors in Bitcoin's (BTC) last bull cycle.

However, Cipolaro pointed out that a significant liquidation event in early October saw ETF inflows reverse, treasury premiums collapse, and stablecoin supply decrease, signaling liquidity leaving the system, in "classic signs" that the loop was "losing momentum."

He added, "Historically, once that loop breaks, the market tends to follow a predictable sequence. Liquidity tightens, leverage attempts to re-form but struggles to gain traction, and previously supportive narratives stop translating into actual flows."

Cipolaro further explained, "We've seen this in every major cycle. The story changes, but the mechanics don't. The reflexive loop pushes the market up, and its reversal sets the stage for the next phase of the cycle."

ETF Outflows and Bitcoin Dominance Increase

Cipolaro noted that spot Bitcoin ETFs, which he described as the standout success story of this cycle, have shifted from a reliable inflow engine "into a meaningful headwind." Nevertheless, a broader range of factors, including global liquidity shifts, macroeconomic headlines, market structure stress, and behavioral dynamics, continue to influence Bitcoin.

He stated, "Bitcoin dominance tends to surge during cyclical drawdowns, as speculative assets unwind more aggressively and capital consolidates back into the most established, most liquid asset in the ecosystem. We've seen this dynamic repeatedly and we're seeing it again."

Bitcoin dominance climbed back above 60% in early November, subsequently settling at approximately 58% as of Monday, according to crypto data platform CoinMarketCap.

Digital Asset Treasury and Stablecoin Decline

Digital asset treasuries and stablecoins were also significant sources of structural demand for Bitcoin. However, Cipolaro mentioned that DAT premiums, where shares are traded relative to net asset value (NAV), have generally decreased, and the supply of stablecoins has fallen for the first time in months, suggesting that investors are withdrawing liquidity from the ecosystem.

Even if the market decline intensifies, Cipolaro believes that the DAT sector still has a considerable runway before actual stress becomes a concern.

He added, "Importantly, while these reversals mark a clear shift from a once-strong demand engine to a potential headwind, no DAT has yet shown signs of financial distress."

He concluded, "Leverage remains modest, interest obligations are manageable, and many DAT structures allow issuers to suspend dividend or coupon payments if needed."

Bitcoin's Long-Term Trajectory Remains Intact

Despite the recent pullback, Cipolaro maintains that the "secular story for Bitcoin remains intact" as it continues to gain institutional traction, sovereign interest is slowly building, and its role as a neutral, programmable monetary asset remains very much in play.

He stated, "Nothing in the past few weeks changes that long-horizon trajectory. But the cycle story, the one driven by flows, leverage, and reflexive behavior, is now asserting itself far more forcefully."

He concluded his advice to investors, "Investors should hope for the best, but prepare for the worst. If past cycles are any guide, the path forward is likely to be uneven, emotionally taxing, and punctuated by sudden dislocations."